WLI

Cash fed cattle trade on Wednesday—light trade and moderate demand—recovered the scant ground lost earlier in the week. Live prices were steady to $1 higher than last week at $120.00 to $120.50/cwt. Dressed trade was steady at $190.

Earlier in the day, sellers passed on bids of $119-$120 in the weekly Fed Cattle Exchange Auction. There were 955 head (six lots) offered for delivery at 1-9 days.

Steady to higher fed cattle prices, supported by follow-through buying helped lift Cattle futures for the second consecutive session.

Live Cattle futures closed an average 96¢ higher (72¢ to $1.42 higher).

Except for 35¢ higher in the back contract, Feeder Cattle futures closed an average of $1.27 higher ($1.10 to $1.45 higher).

Choice boxed beef cutout value was 38¢ higher Wednesday afternoon at $209.01/cwt. Select was 1¢ lower at $188.64.

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Major financial indices settled mixed on Wednesday, after closing at record-high levels the previous day. The tech-driven NASDAQ closed higher again, supported by a deal between Amazon and a leading health technology company. Pressure across the broader market included worries about current market valuation expressed by the Federal Reserve in its most recent minutes.

The Dow Jones Industrial Average closed 64 points lower. The S&P 500 was down 1 point. The NASDAQ closed 4 points higher.

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Frozen beef stocks continued lower year over year in October, according to the latest USDA Cold Storage report. Total pounds of beef in freezers Oct. 31 were 2% more than the previous month but 5% less than last year.

Frozen pork supplies were down 3% from the previous month and down slightly from last year.

Total red meat supplies in freezers were down 1% from the previous month and down 2% from last year.

Total frozen poultry supplies were 4% less than the previous month but 12% more than a year earlier.

Cattle feeders in the Southern Plains traded fed cattle for $118/cwt. on Tuesday, which was $1 less than last week. Though too few to trend, there were a few live sales reported in Nebraska at $118-$120, steady to $1 lower than last week; a few dressed trades $2 lower at $188.

Choice boxed beef cutout value was $2.45 higher Tuesday afternoon at $206.63/cwt. Select was 60¢ higher at $188.65.

Slightly lower to steady cash fed cattle prices, higher wholesale beef value and short covering ahead of Thanksgiving all helped Cattle futures gain a foothold, at least for a day.

Live Cattle futures closed an average $1.05 higher (47¢ to $1.30 higher).

Except for 35¢ higher in the back contract, Feeder Cattle futures closed an average of $1.69 higher ($1.00 to $2.07 higher).

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Tech stocks led major U.S. financial indices to new record highs on Tuesday. Support also came from stronger than expected quarterly earnings from the likes of Hormel Foods, as well as optimism heading into Black Friday.

The Dow Jones Industrial Average closed 160 points higher. The S&P 500 closed 16 points higher. The NASDAQ closed 71 points higher.

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“Producers should prepare for a good market in 2018 but not an over-the-top market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

Griffith notes that calf prices typically start increasing in January before grabbing another gear higher in March and early April. He notes that steer calf prices (500-600 lbs.) last year advanced from $107/cwt. in November to $140-$145 in March, ultimately peaking later than normal in June at $161.

Given current price levels, he doubts the increase from now until March will be as dramatic as last year.

“Significant seasonal price softening has yet to occur in the calf market in the fall of 2017, and there is no indication prices will falter at this point,” Griffith says. “It is always difficult to predict, but a price on these calves in March ranging from $148 to $156 may be as optimistic as it comes at this point. These predictions cannot take into account changes in international policy and trade agreements, nor do they take into account some sudden shock to the market. The point is that the market is unlikely to make as strong of a move as it did one year ago to the upside and the downside risk is very limited moving into the spring.”

As logic suggested, futures traders pushed Cattle futures sharply lower on Monday, in the wake of Friday’s monthly Cattle on Feed report. October placements were 10.2% more than the previous year, about 3% more than average estimates heading into the report.

However, Katelyn McCullock, economist with the American Farm Bureau Federation points out feedlot marketings remain higher, too.

In the latest issue of In the Cattle Markets (see below), McCullock explains, “Marketings have continued to be aggressive, so feedlot inventories have not become burdensome even though nine of the last 12 months have shown placements over 10% ahead of the prior year. Marketings have remained 3-10% above a year ago all year.” In October, marketing were 5.2% more than a year earlier.

Live Cattle futures closed an average $1.34 lower (77¢ to $1.75 lower).

Feeder Cattle futures closed an average of $2.16 lower ($1.07 to $2.57 lower).

Choice boxed beef cutout value was $1.06 lower Monday afternoon at $206.18/cwt. Select was 20¢ higher at $188.05.

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Major U.S. financial indices closed higher on Monday, with positive reads on the economy (see below) offset by uncertainty about tax reform.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.2% in October to 130.4 (2010 = 100), following a 0.1% increase in September, and a 0.4% increase in August.

“The US LEI increased sharply in October, as the impact of the hurricanes dissipated,” says Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year.”

The Dow Jones Industrial Average closed 72 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 7 points higher.

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“Prices for bigger feeder cattle dropped last week under the pressure of declining Feeder futures. However, heavy feeder prices have been a bit stronger relative to calves all fall and thus remain very good,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Steer prices are realigning to a more typical rollback with heavy weights declining relative to calf prices. Heifers, however, continue to have a very flat price structure with heifers from 475 to 725 pounds all priced within $3/cwt. last week.”

Peel explains strong stocker demand continued to fuel calf prices higher and counter-seasonally through the middle of November. In Oklahoma, for instance, he points out steers calves are bringing $140-$200 per head more than last year; $100-$150 more for heifer calves.

“The strength in feeder cattle prices has been quite remarkable given increased supplies,” Peel says. “Auction volumes have been 25% higher than last year for the last four weeks.”

Katelyn McCullock, economist with the American Farm Bureau Federation notes in the latest issue of In the Cattle Markets that strong prices for 500-600 lbs. cattle also could reflect smaller, farmer-feeder lots taking advantage of low feed prices and marketing some of their grain through cattle.

“These higher than expected prices across the feeder cattle complex are likely a premonition of 2018 being another year of growth and expansion in the cattle sector,” McCullock says. “Southern plains 500-600 lbs. weights were $36/cwt. above 2016 last week, while 700-800 lb. weights were $40 higher.”

Feeder Cattle futures closed sharply lower on Friday with recent weakness, light trade, higher corn prices and defensiveness to the Cattle on Feed report (see below). Live Cattle followed along but less steeply.

Live Cattle futures closed an average 67¢ lower (45¢ to 90¢ lower).

Feeder Cattle futures closed an average of $1.67 lower ($1.00 to $2.17 lower).

Choice boxed beef cutout value was $3.00 lower Friday afternoon at $207.24/cwt. Select was 2¢ higher at $187.85.

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Major U.S. financial indices closed lower on Friday with profit taking from the previous session’s sharp gains apparently one of the drivers.

The Dow Jones Industrial Average closed 100 points lower. The S&P 500 closed 6 points lower. The NASDAQ closed 10 points lower.

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Placements came in higher than pre-report estimates once again—about 3% more than average expectations, according to the monthly Cattle on Feed report from USDA on Friday. The 2.39 million head placed on feed in October were 10.2% more than last year. In terms of weight composition, 52.93% went on feed weighing 700 lbs. or less and 10.46% went on feed weighing 900 lbs. or more.

“October is an important month when referencing placements as it is the largest month in regard to number of animals placed into feedyards,” say analysts with the Agricultural Marketing Service.

Marketings in October of 1.80 million head were 5.6% more than a year earlier, which was in line with pre-report estimates.

All told, there were 11.3 million head on feed Nov.1, which was 6.3% more than a year earlier, also in line with expectations.

Choice boxed beef cutout value was 11¢ higher Thursday afternoon at $210.24/cwt. Select was $2.78 lower at $187.83.

Cattle futures drifted lower on Thursday with light trade and perhaps some defensiveness ahead of Friday’s Cattle on Feed report.

Except for 10¢ higher in the back contract, Live Cattle futures closed an average 47¢ lower (22¢ to 90¢ lower).

Feeder Cattle futures closed an average of 21¢ lower. Spot Nov went off the board at $157.77.

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Major U.S. financial indices closed sharply higher on Thursday, rebounding from the previous session’s losses. Support included the House passage of its tax reform proposal, as well as the likes of Walmart and Cisco beating estimates for quarterly earnings and revenue.

The Dow Jones Industrial Average closed 187 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 87 points higher.

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“For most of 2017, market demand has pulled cattle through U.S. feedlots at a rapid pace, which has likely kept dressed weights lower than last year and limited the number of cattle in feedlots over 150 days,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “At present, packers may be forced to bid up prices because feedlots do not have an incentive to sell below their breakeven prices, in light of low feed costs and high futures prices for December and February. With strong demand for beef and continued firm packer margins, fed cattle prices for the fourth quarter are expected to average above last year. However, in the first half of 2018, fed prices are expected to be below those of 2017, reflecting increasing supplies of slaughter-ready cattle.”

Projected fourth-quarter fed steer prices were raised from last month to $117-$121/cwt. Forecast first-quarter prices for 2018 were raised to $116-$124.

On the other side of the trade, ERS raised the fourth-quarter projected price for medium frame No.1 feeder steers weighing 750-800 lbs. to $155-$159/cwt. Forecast prices for the first quarter of next year were raised to $144-$152; $143-153 in the second quarter.

Beef production will increase about 4.6% next year to 27.6 billion lbs., according to ERS as cattle numbers increase.

“An increase in overwinter forage availability and a larger calf crop likely support the strong placements in 2018,” ERS analysts say. “The increase in the proportion of heifers on feed on Oct. 1, 2017, may reflect that a modest retention of heifers for breeding supports more heifers to be placed on feed in the coming months. Based on strong margins at the retail and packer level, demand is expected to encourage feedlots to market cattle at a timely pace in 2018.”